Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 2, Problem 2.19P
Problem 2.19
LO 2, 3, 4
Prepare an income statement,
The information on the following page was obtained from the records of Breanna, Inc.:
| $ 40.000 | |
| Accumulated depreciation | 208,000 |
| Cost of goods sold | 512,000 |
| Income tax expense | 32,000 |
| Cash | 260.000 |
| Sales | 800,000 |
| Equipment | 480,000 |
| Selling, general, and administrative expenses | 136,000 |
| Common stock (36,000 shares) | 360.000 |
| Accounts payable | 60,000 |
| 92,000 | |
| Interest expense | 24,000 |
| Merchandise inventory | 148.000 |
| Long-term debt | 160,000 |
| Dividends declared and paid during 2016 | 48,000 |
Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2016, and that all income statement items reflect activities that occurred during the year ended December 31, 2016. There were no changes in paid in capital during the year.
Required:
- Prepare an income statement and statement of changes in stockholders’ equity for the year ended December 31, 2016, and a balance sheet at December 31, 2016, for Breanna, Inc.
Based on the financial statements that you have prepared for part a, answer the questions in parts b-e. Provide brief explanations for each of your answers and state any assumptions you believe are necessary to ensure that your answers are correct.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Instructions
On March 31, 20Y9, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture store, are as follows:
Accounts Receivable
$163,800
Accumulated Depreciation-Building
740,900
Administrative Expenses
526,350
Building
2,507,600
Cash
186,150
Common Stock
304,450
Cost of Goods Sold
3,852,200
Dividends
184,450
Interest Expense
10,200
Inventory
1,022,600
Notes Payable
238,600
Office Supplies
19,050
Retained Earnings
1,267,250
Salaries Payable
7,700
Sales
6,264,600
11
03:03:45
The comparative balance sheets and an income statement for Raceway Corporation follow.
Balance Sheets
As of December 31
Assets
Cash
Accounts receivable
Inventory
Prepaid rent
Equipment
Accumulated depreciation
Land
Total assets
Liabilities
Accounts payable (inventory)
Salaries payable
Stockholders' equity
Common stock, $50 par value
Retained earnings
Total liabilities and equity
Income Statement
For the Year Ended December 31, Year 2
Sales
Cost of goods sold
Gross profit
Operating expenses
Year 2
$61, 339
28,418
156, 774
Cash flows from operating activities:
2,395
259, 520
(138, 830)
194, 180
$563, 796
$65, 792
24, 267
253,000
220, 737
$563,796
$1,495,000
(794,543)
700,457
(20,610)
(22,540)
(259, 320)
(258,350)
$139,637
Year 1
$41, 170
20, 840
450
172,
RACEWAY CORPORATION
Statement of Cash Flows
For the Year Ended December 31, Year 2
4,790
287,678
(230,570)
81, 188
$377,538
Depreciation expense
Rent expense
Salaries expense
other operating expenses
Net income
Other…
Question 24
Muscarella Inc. has the following balance sheet and income statement data:
Cash
$ 14,000
Accounts payable
$ 42,000
Receivables
70,000
Other current liabilities
28,000
Inventories
210,000
Total CL
$ 70,000
Total CA
$294,000
Long-term debt
70,000
Net fixed assets
126,000
Common equity
280,000
Total assets
$420,000
Total liab. and equity
$420,000
Sales
$280,000
Net income
$ 21,000
The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.70, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?
a.
4.28%
b.
5.21%
c.
4.73%
d.
4.50%
e.
4.96%
Chapter 2 Solutions
Accounting: What the Numbers Mean
Ch. 2 - Prob. 2.1MECh. 2 - Prob. 2.2MECh. 2 - Prob. 2.3MECh. 2 - Prob. 2.4MECh. 2 - Mini-Exercise 2.5 LO 2. 4 Identify accounts by...Ch. 2 - Mini-Exercise 2.6 LO 2. 4 Identify accounts by...Ch. 2 - Prob. 2.7ECh. 2 - Exercise 2.8 LO 2. 4 Identify accounts by category...Ch. 2 - Exercise 2.9 LQ 2 , 3 Understanding financial...Ch. 2 - Exercise 2.10 LO 2 , 3 Understanding financial...
Ch. 2 - Prob. 2.11ECh. 2 - Exercise 2.12 LQ 2. 3 Calculate retained earnings...Ch. 2 - Prob. 2.13ECh. 2 - Prob. 2.14ECh. 2 - Prob. 2.15PCh. 2 - Prob. 2.16PCh. 2 - Problem 2.17 LO 2, 3, 4 Understanding and...Ch. 2 - Problem 2.18 LO 2. 3, 4 Understanding and...Ch. 2 - Problem 2.19 LO 2, 3, 4 Prepare an income...Ch. 2 - Prob. 2.20PCh. 2 - Problem 2.21
LO 2, 3
Transaction...Ch. 2 - Prob. 2.22PCh. 2 - Problem 2.23 LO 2, 3, 5 Complete the balance sheet...Ch. 2 - Prob. 2.24PCh. 2 - Prob. 2.25PCh. 2 - Prob. 2.26PCh. 2 - Case 2.27 LO 2, 4, 6, 7 Prepare a personal balance...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Problem 16-21 (Algo) Incomplete Statements; Ratios Analysis [LO16-2, LO16-3, LO16-4, LO16-5, LO16-6] Pepper Company provided the incomplete financial statements shown below as well as the following additional information: a. All sales during the year were on account. b. There was no change in the number of shares of common stock outstanding during the year. c. The interest expense on the income statement relates to the bonds payable; the amount of bonds outstanding did not change during the year. d. Selected balances at the beginning of the current year were: Accounts receivable Inventory Total assets e. Selected financial ratios computed from the statements below for the current year are: Earnings per share Debt-to-equity ratio Accounts receivable turnover Current ratio Return on total assets Times interest earned ratio $ 230,000 $ 340,000 $ 2,240,000 Acid-test ratio Inventory turnover $ 4.68 0.790 16.0 2.10 14% 7.75 1.20 9.0 Required: Compute the missing amounts on the company's…arrow_forwardAssets Cash Beech Corporation Balance Sheet June 30 Accounts receivable Inventory Plant and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Common stock $ 72,000 128,000 60,900 218,000 $ 478,900 $ 79,000 308,000 91,900 Retained earnings Total liabilities and stockholders' equity $ 478,900 Exercise 8-13 (Algo) Beech's managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $290,000, $310,000, $300,000, and $320,000, respectively. 2. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 45% in the month of sale and 55% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. 3. Each month's ending inventory must equal 20% of the cost of next month's sales. The cost of goods sold is 70% of sales. The company pays for 30% of its merchandise purchases in the month of the…arrow_forwardExtracts from the balance sheet ( 000,000 ) of A Co. as follows: Current Assets Merchandise Inventory P 77.1 Accounts Receivable 50.1 Cash on Hand and in 85.0 Creditors: Amounts falling due within one year 70.2 Bank Overdraft Other Creditors 147.0 What is the current ratio and the acid test ratio of the co.? Current ratio Acid test ratio a. .96 .38 b. .96 .36 c. .98 .61 d. .98 .62arrow_forward
- 24 range the following items in proper balance sheet presentation: (Be sure to list the assets in order of their liquidity. Input all swers as positive values.) Accumulated amortization Retained earnings Cash Bonds payable Accounts receivable Plant and equipment-original cost Accounts payable Allowance for bad debts Common stock, 100,000 shares outstanding Inventory Preferred stock, 1,000 shares outstanding Marketable securities Investments Notes payable $230,000 195,300 12,000 136,000 51,500 700,000 42,000 5,200 172,000 73,000 60,000 20,000 22,000 38,000 Help Save & Exit Submitarrow_forwardQuestion 1 The following are financial statements of Crane Company. Crane CompanyIncome StatementFor the Year Ended December 31, 2022 Net sales $2,192,500 Cost of goods sold 1,010,500 Selling and administrative expenses 900,500 Interest expense 78,000 Income tax expense 62,500 Net income $ 141,000 Crane CompanyBalance SheetDecember 31, 2022 Assets Current assets Cash $ 55,100 Debt investments 89,000 Accounts receivable (net) 168,400 Inventory 236,500 Total current assets 549,000 Plant assets (net) 572,500 Total assets $ 1,121,500 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 152,000 Income taxes payable 31,000 Total current liabilities 183,000 Bonds payable 220,740 Total liabilities 403,740 Stockholders’ equity Common stock 345,000 Retained earnings 372,760…arrow_forwardCurrent Position Analysis The following items are reported on a company's balance sheet: Cash $131,900 Marketable securities 103,000 Accounts receivable (net) 82,100 Inventory 95,100 Accounts payable 317,000 Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place. a. Current ratio b. Quick ratioarrow_forward
- acccounting The following items are reported on a company’s balance sheet: Cash $120,000 Marketable securities 40,000 Accounts receivable (net) 50,000 Inventory 90,000 Accounts payable 150,000 Determine (a) the current ratio and (b) the quick ratio. Round your answers to one decimal place. a. Current ratio fill in the blank 1 b. Quick ratio fill in the blank 2arrow_forwardA moodle1.du.edu.om P Flag question Some selected financial statement items belonging to Mirbat Company are given in the table below. According to this information, which of the following is Receivables Turnover ratio? Average Receivables 15,000 Sales 77,000 Gross Profit 30,000 Non-current Assets 80,000 Sales returns 2,000 Shareholders' Equity 65,000 Select one: а. 3.33 O b. 0.20 c. 5.13 O d. 5 Previous page Next page IIarrow_forwardgEnabled: Midterm exami 7:55 Microsoft's current assets consist of cash, short-term investments, accounts receivable, and inventory. The following data were abstracted from a rccent financial statement: Inventory Total assets Current ratio Acid-test ratio Debt to equity ratic $ 190,000 $ 780,000 Shareholders' equity 2.65 1.70 1.60 Required: Compute the shareholders' equity for Microsoft: Savedarrow_forward
- Current Position Analysis The following items are reported on a company's balance sheet: Cash $537,500 Marketable securities 419,900 Accounts receivable (net) 334,600 Inventory 387,600 Accounts payable 646,000 Determine (a) the current ratio and (b) the quick ratio. Round your answers to one decimal place. a. Current ratio fill in the blank 1 b. Quick ratioarrow_forwardQuestion 3 Footfall Manufacturing Ltd. reports the following financial information at the end of the current year: Net Sales Debtor's turnover ratio (based on net sales) 2 Inventory turnover ratio Fixed assets turnover ratio |Debt to assets ratio |Net profit margin |Gross profit margin Return on investment |S100,000 1.25 0.8 0.6 5% 25% 2% Use the given information to fill out the templates for income statement and balance sheet given below: Income Statement of Footfall Manufacturinf Ltd. for the year ending December 31, 20XX (in S) 100,000 Sales Cost of goods sold Gross profit Other expenses Earnings before tax Тах @ 50% Earnings after tax Balance Sheet of Footfall Manufacturing Ltd. as at December 31, 20XX (in S) Liabilities Equity Long term debt Short term debt Amount Assets Net fixed assets Amount 50,000 Inventory Debtors Cash ТОTAL ТОTALarrow_forwardNet Sales COGS Net Income Accounts Receivable Inventory Current Assets Fixed Assets Total Assets Current Liabilities Long-Term Debt Total Liabilities Shareholder's Equity Number of Shares Outstanding now Transcribed Text 1 10586 1582 2936 3333 1 7929 7294 15223 3026 288 3314 11909 7493 G C 2 4048 2025 21 230 44 299 1281 1580 369 245 614 966 48 Questions 1. What company collects its receivables the slowest? 2 w 3 213 66 7 9 16 68 12 80 23 1 24 56 24arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License